MOSL: HDFC LIFE INSURANCE (Neutral)-HDFC Life announces 100% acquisition in Exide Life
HDFC LIFE INSURANCE: HDFC Life announces 100% acquisition in Exide Life
(HDFCLIFE IN, Mkt Cap USD20.3b, CMP INR734, TP INR750, 2% Upside, Neutral)
- HDFC Life has announced the 100% acquisition of Exide Life for consideration of INR66.87b, of which INR7.26b would be paid in cash. Furthermore, the company would issue 87m shares to Exide Industries Limited towards the balance amount at INR685 per share. HDFC Life expects to secure all the approvals and complete the transaction by 30th Jun'22.
- In FY21, Exide Life earned a total premium of INR33.25b (8.6% that of HDFC Life), and total AUM stood at INR187.8b (10.4% that of HDFC Life). The acquisition would enable HDFC Life to increase its market share by ~140bp to 16.5% (15.1% for FY21) as per the total new business APE. This would make HDFC Life the second largest life insurer, while IPRU remains a close third, with market share of 15.7% for FY21. HDFC Life's market share among private players on an Individual APE basis would improve ~130bp to 16.8%, thus narrowing the gap with private sector leader SBI Life.
- The acquisition would enable HDFC Life to strengthen its agency channel as Exide Life has a total agent count of ~37k, nearly 34% that of HDFC Life. Exide Life has a strong foothold in southern India, especially in Tier 2 and 3 locations. This complements the overall geographical presence of HDFC Life.
- The transaction values Exide Life at 2.5x Jun'21 reported EV, which appears expensive in the context of Exide life's three-year premium and EV CAGR of ~10% and 8%, respectively. However, given the total size of the transaction, our view on the company does not change. Our EV per share estimates on HDFC Life is likely to increase by 2.5%/~2% over FY22/FY23E as the transaction is completed. Maintain Neutral.
HDFC Life Insurance Company Ltd, formerly HDFC Standard Life Insurance Company Limited, is a life insurance company. The Company provides various individual and group insurance solutions across India. It offers a range of life insurance plans, such as term insurance plan, women's plan, health insurance plans, child education plans, unit linked insurance plans (ULIPs), and savings and investment plans. It operates through 13 segments: Participating Life (Individual & Group), Participating Pension (Individual & Group), Participating Pension Group Variable, Non Participating Life (Individual & Group), Non Participating Pension (Individual & Group), Non Participating Life Group Variable, Non Participating Pension Group Variable, Non Participating - Annuity, Non Participating - Health, Unit Linked - Individual Life, Unit Linked - Individual Pension, Unit Linked - Group Life and Unit Linked - Group Pension. It has approximately 410 branches in over 900 cities and towns in India.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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